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COMMENTARY

How to turn customer feedback (positive or negative) into more revenue for your restaurant

Every day, customers post thousands of restaurant reviews online. In fact, to date, Yelp has captured nearly 150 million of them. And it's not just Yelp — Google, OpenTable and many delivery sites have jumped into the feedback game. But with more customer feedback comes more paralysis — one restaurant VP of Marketing we work with estimated spending two hours per day reading and replying — creating a growing consensus among restaurants that the adage "feedback is a gift"is ringing a little hollow these days.

Certainly, there are social listening tools that work to truncate this massive investment of time — Hootsuite, Sprout Social and Mention — for example. It's well understood that public reviews are a major driver of trial and new customer acquisition. In a paper called "Reviews, Reputation, and Revenue: The Case of Yelp.com," Michael Luca, an assistant professor at Harvard Business School, explored how a one-star difference on Yelp can translate into a 5 percent to 9 percent swing in annual revenues. That's real money.

So higher star ratings can drive new customers — that seems pretty obvious on the surface. But the impact of feedback on existing customers has been less well understood until now. In a recent study of tens of thousands of individual customer satisfaction ratings captured on our platform following a verified transaction, we found that customers who provide private feedback have a 1.5x higher lifetime value and that — unsurprisingly — consumers with two consecutive negative experiences reduce their visit frequency by 45 percent.

The review game is frustrating to most businesses for one reason — the reviewers themselves are basically anonymous, hidden behind a veil of username secrecy. In most cases, there's not even any way to validate that the customer transacted with the business. This leads to frustration and a feeling of hopelessness. But over the last two years, we've studied the impact of soliciting and responding to feedback and the results are staggering. In our recently released report on the subject, Thanx found that just by actively soliciting feedback post-transaction (the "virtual table touch") — and most remarkably, regardless of whether that feedback expressed positive or negative sentiment — a restaurant will drive a 7 percent increase in visit frequency. For restaurants that take the time to respond personally, that number increases to 14 percent. And when the consumer — again, independent of whether the rating was positive or negative — receives recognition in the form of a reward or discount, their subsequent visit frequency increases by as much as 22 percent.

Using the Net Promoter System is imperative as its feedback is plentiful — approximately 11x that of Google and Yelp combined — but it's tied to specific, verified consumers. More than just a simple star rating, NPS has proven to highly-correlated with overall business outcomes: so-called Promoters (those who provide a 9 or 10 rating out of 10) spend 21 percent more each year, churn 8 percent less, and account for nearly 90 percent of referrals.

So clearly restaurants need to take good care of these promoters — and that starts with knowing who they are. This is where social listening falls flat. It's also where most loyalty programs fail, limited to identifying and incentivizing repeat purchases but not tied to customer feedback.

So how can restaurant owners and managers approach customer feedback? First, start by acknowledging it — otherwise the customer assumes it goes into a black hole. We sometimes see restaurant owners who are dismissive about what customers have to say, and indeed, it's easy to convince yourself that you know better than customers. Feedback is the gift that everyone says it is — and it's an easy way to drive increases in revenue. It's also not a disaster when it's negative. While two consecutive bad experiences will torpedo a customer's repeat likelihood by 45 percent, a single negative experience (in NPS terms it's a rating of 0 to 6 denoting a "detractor") followed by a positive one shows very little long-term impact — particularly if the brand took the time to engage and reply personally. These channels are a way to plug the proverbial leaky bucket — and all it takes is a little bit of tender loving care. No discounts required.

There's a reason servers have been trained to stop by mid-course to ask how everything is going — it increases tips. In a modern world, tech can extend this practice outside the four walls of the restaurant (and the same goes for retail, actually).

Customers feel valued when a real person takes the time to respond thoughtfully — it helps them feel more connected to the brand. And just as in personal relationships, a personal two-way conversation creates positive emotions. It should come as no surprise then that we see the best restaurant owners, managers, and quite frankly anyone who runs a brick-and-mortar business valuing feedback and working hard to get more of it. After all, soliciting, responding and caring about your best customers delivers greater loyalty and ultimately higher revenue. That's the real gift.